For the first three months of the fiscal year 2003/2004 a deficit of £13.8bn has been reached, exaggerating concerns that the government will miss its borrowing forecast of £27bn for the year.

The Treasury has indicated that departments may not get what they want in the next spending round in order to try and stay on track for its targets.

However a report by Ernst & Young’s ITEM club predicts that borrowing will overshoot targets both this year and next. A total of £31bn has been suggested for this year while the Item club predicts that 2004/2005 borrowing will be £30bn instead of the forecast of £24bn.